Oil Prices Edge Near Four-Month Highs with Focus on Russia Sanctions' Effect

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Oil prices dipped slightly at market open on Tuesday but stayed close to four-month highs as China and India sought new suppliers following the Biden administration's latest and most severe sanctions on Russian oil.

Brent crude futures dropped 22 cents, or 0.27%, to $80.79 per barrel by 0122 GMT, while U.S. West Texas Intermediate (WTI) crude fell 16 cents, or 0.2%, to $78.66 per barrel. This followed a roughly 2% gain on Monday after the U.S. Treasury Department imposed sanctions on Gazprom Neft and Surgutneftegas, along with 183 vessels associated with Russia’s "shadow fleet" of tankers. U.S. officials estimate that these sanctions could cost Russia billions of dollars each month.

According to ING analysts, the sanctions on a significant portion of Russia's shadow tanker fleet will make it harder for Russia and its buyers to bypass the G-7 price cap. This could remove as much as 700,000 barrels per day (bpd) from the market, potentially eliminating the anticipated surplus for this year. However, the analysts noted that the actual impact might be less, as buyers and sellers could find ways to circumvent the sanctions.

Robert Rennie, head of commodity and carbon strategy at Westpac, stated that the new sanctions could disrupt up to 800,000 bpd of Russian crude exports for a prolonged period, along with 150,000 bpd of diesel exports. This could push Brent prices toward $85 per barrel, with support from ongoing OPEC+ production cuts.

Goldman Sachs also projected that Brent prices could reach $85 per barrel in the near term, and potentially $90 if a decline in Russian output coincides with a reduction in Iranian production.

President Joe Biden has suggested that the sanctions would stabilize prices and were not intended to hurt U.S. consumers.

However, weaker demand from major buyer China could offset the tightening supply. Official data released on Monday showed that China’s crude oil imports in 2024 had fallen for the first time in two decades, excluding the COVID-19 pandemic.

Meanwhile, six European countries urged the EU to lower the $60 per barrel price cap on Russian seaborne crude and refined oil products, as part of efforts to limit Russia's ability to fund its war in Ukraine.

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.